PERALTA, J.: FACTS AS TO PETITIONER :PAGCOR was created pursuant to PD No. 1067-A2 on January 1, 1977. Simultaneous to its creation, P.D. No. 1067B3 (supplementing P.D. No. 1067-A) was issued exempting PAGCOR from the payment of any type of tax, except a franchise tax of five percent (5%) of the gross revenue.4 On January 1, 1998, R.A. No. 8424,8 otherwise known as the National Internal Revenue Code of 1997, took effect. Section 27 (c) of R.A. No. 8424 provides that government-owned and controlled corporations (GOCCs) shall pay corporate income tax, except petitioner PAGCOR, GSIS,SSS, PHIC, and PCSO. With the enactment of R.A. No. 9337 10 on May 24, 2005, certain sections of the NIRC. The particular amendment that is at issue in this case is Section 1 of R.A. No. 9337, which amended Section 27 (c) of NIRC of 1997 by excluding PAGCOR from the enumeration of GOCCs that are exempt from payment of corporate income tax. FACTS AS TO RESPONDENT: Respondent BIR issued Revenue Regulations (RR) No. 16-2005,13 specifically identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under Section 108 of the National Internal Revenue Code of 1997, as amended by R.A. No. 9337. ISSUES AS TO PETITIONER 1. Petitioner argues that RA 9337 is null and void ab initio for being repugnant to the equal protection clause embodied in Section 1, Article III of the 1987 Constitution. 2. Petitioner argues that RA 9337, section 1(c) is violative of the nonimpairment clause embodied in section 10, Article III of the Constitution. ISSUES AS TO RESPONDENT 1. Respondent argues that RR 16-005 specifically identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under Section 108 of the National Internal Revenue Code of 1997, as amended by R.A. No. 9337 is not null and void. RULING OF THE COURT 1. As to the issues of petitioner, the Supreme Court ruled in favor of respondent PAGCOR cannot find support in the equal protection clause of the Constitution, as the legislative records of the Bicameral Conference Meeting dated October 27, 1997, of the Committee on Ways and Means, show that PAGCORs exemption from payment of corporate income tax, as provided in Section 27 (c) of R.A. No. 8424, or the National Internal Revenue Code of 1997, was not made pursuant to a valid classification based on substantial distinctions and the other requirements of a
reasonable classification by legislative bodies, so that the law may operate
only on some, and not all, without violating the equal protection clause. The legislative records show that the basis of the grant of exemption to PAGCOR from corporate income tax was PAGCORs own request to be exempted. As regards franchises, Section 11, Article XII of the Constitution 31 provides that no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. In this case, PAGCOR was granted a franchise, within the territorial jurisdiction of the Republic of the Philippines.36 . Hence, the provision in Section 1 of R.A. No. 9337, amending Section 27 (c) of R.A. No. 8424 by withdrawing the exemption of PAGCOR from corporate income tax, which may affect any benefits to PAGCORs transactions with private parties, is not violative of the non-impairment clause of the Constitution 2. As to the issue of respondent The Supreme Court ruled against respondent Anent the validity of RR No. 16-2005, the Court holds that the provision subjecting PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere in R.A. No. 9337 is it provided that petitioner can be subjected to VAT. R.A. No. 9337 is clear only as to the removal of petitioner's exemption from the payment of corporate income tax, which was already addressed above by this Court. It is settled rule that in case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails, because the said rule or regulation cannot go beyond the terms and provisions of the basic law.43 RR No. 16-2005, therefore, cannot go beyond the provisions of R.A. No. 9337. Since PAGCOR is exempt from VAT under R.A. No. 9337, the BIR exceeded its authority in subjecting PAGCOR to 10% VAT under RR No. 16-2005; hence, the said regulatory provision is hereby nullified. RULING WHEREFORE, the petition is PARTLY GRANTED. Section 1 of Republic Act No. 9337, amending Section 27 (c) of the National Internal Revenue Code of 1997, by excluding petitioner Philippine Amusement and Gaming Corporation from the enumeration of government-owned and controlled corporations exempted from corporate income tax is valid and constitutional, while BIR Revenue Regulations No. 16-2005 insofar as it subjects PAGCOR to 10% VAT is null and void for being contrary to the National Internal Revenue Code of 1997, as amended by Republic Act No. 9337.